Numbers on a financial statement have different degrees of importance at different times and, for cannabis companies, operating cash flow is currently the most important – the basic indicator that a company is able to bring in more cash than it expends, and a precursor to net income – so this article compares the operating cash flow of the 8 largest cannabis companies by market capitalization, with each other.
Without positive cash flow — more money coming in than going out — a business doesn’t survive. Very simply, cash flow is the best measure of a company’s financial and operational health so it’s important to compare cannabis companies on that metric.
There are three kinds of cash flow (as defined by Investopedia):
This article focuses on operating cash flow, which is the one that most closely reflects the health of a company’s ongoing operations, as opposed to free cash flow, which is cash flow minus capital expenditures. Including the unusually high capital expenditures of cannabis companies at present would obscure the underlying operating performance.
The table below shows the operating cash flow of eight cannabis companies as opposed to net income for showing the health of a company because income includes many non-cash lines, like depreciation, goodwill, stock-based compensation and inventory changes, which may have a minimal effect on operations.
In the table, although Green Thumb appears in second place behind Verano, they should be considered number one as Verano’s cash flow is inflated because they have elected to defer some income taxes which they view as a low interest loan from the government. For 2021, this amounted to $108 million, which for comparison purposes must be subtracted from cash flow. With the subtraction, Verano still performed substantially better than all the other competition except Green Thumb. In fact, two of the other companies with positive cash flow in 2021, Trulieve and Cresco, would have been negative if their smaller deferred taxes were considered. Green Thumb is current on taxes.
|Operating Cash Flow||2019||2020||2021||TTM|
|Curaleaf Holdings (OTCPK:CURLF)||-38||12||-34||29|
|Trulieve Cannabis (OTCQX:TCNNF)||19||100||13||-1|
|Green Thumb Industries (OTCQX:GTBIF)||-18||96||132||148|
|Cresco Labs (OTCQX:CRLBF)||-25||-8||14||-2|
|Verano Holdings (OTCQX:VRNOF)||-7||72||181||210|
|Ascend Wellness (OTCQX:AAWH)||-41||-6||-42||-44|
Green Thumb is far above most major cannabis companies in operating cash flow and at the top in net income and, based on three years of data, Green Thumb is on a positive trend on these important measures, suggesting that its out-performance will continue.
Lorimer Wilson is an economic & financial commentator who has written numerous articles on economics, finance, precious metals, and rare earth metals. He is the Editor of www.munKNEE.com that provides a selection of the internet’s best finance articles in an edited, reformatted and abridged format to ensure a fast and easy read. He is a frequent contributor to TalkMarkets.com.